Mortgage origination activity, or the measure of how many new home loans are started, slowed down for the fourth consecutive month in December, according to data from Black Knight.
New mortgage purchases fell 22.5% while new mortgage refinances dropped 17.1%, each ending 2021 at their lowest point in two years, Black Knight’s December 2021 Originations Market Monitor report said.
"Seen in the light of the normal seasonal slowdown in home sales as well as our current rate environment, December’s more than 20% drop in purchase loan locks isn’t all that surprising," Scott Happ, Black Knight president of secondary marketing technologies, said. "Neither was the continued decline in rate/term refinance lending, though the size of the annual decline is noteworthy, if not sobering."
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Cash-out refinances increase
Despite the slowdown in refinance activity, Black Knight’s data showed that homeowners still utilized cash-out refinances to take advantage of record levels of equity. New cash-out refinances fell 10% in a seasonal decrease from November to December but remained up 18% from December 2020.
"While cash-out refi locks were also down for the month, they’re still up nearly 18% from the same month last year as the product remains somewhat insulated by borrowers taking advantage of soaring home equity levels," Happ said in December.
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Interest rates to continue rising, slowing down refinance originations
Interest rates are likely to continue rising throughout 2022, potentially slowing down any future refinance activity. Inflation surged at an annual rate of 7% in December, its highest increase since 1982. To curb rising inflation, the Federal Reserve is predicted to begin raising rates in March 2022.
"With the Federal Reserve speeding the tapering of its bond buying and indicating multiple rate hikes in 2022 to curb inflation, 30-year conforming rates sat above 3.3% for much of December," Happ said. "Indeed, our OBMMI daily interest rate tracker showed average rates at year’s end within just two basis points of the 2021 high of 3.37%. Likely in response to those rising rates – and the seasonal slowdown in home purchases – we saw locks decline across all product types in December, with total volume down 35% year-over-year."
If you want to take advantage of interest rates before they rise further, you could consider refinancing your mortgage to save money on your monthly payments. Contact Credible to speak to a home loan expert and get all of your questions answered.
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